Discussion of a Worker’s Compensation Medicare Set-Aside
Chances are that if you suffered a major work injury and you’re already receiving Social Security Disability, a Worker’s Compensation Medicare Set-Aside (WCMSA or Medicare Set Aside) is in your future. It is essential to know how it’s defined, why it’s needed (or not!) and how it’s funded and administered. Failure to understand and properly handle a Medicare Set-Aside can be devastating. Imagine having Medicare tell you they won’t pay for any of your medical care until you spend down a certain amount of your own money first! The Medicare Set-Aside, if administered properly, is a tool to help protect an injured worker’s ability to receive medical treatment in the future.
How Does Medicare Define a Worker’s Compensation Medicare Set-Aside?
According to Medicare:
A Workers’ Compensation Medicare Set-Aside Arrangement (WCMSA) is a financial agreement that allocates a portion of a workers’ compensation settlement to pay for future medical services related to the workers’ compensation injury, illness, or disease. These funds must be depleted before Medicare will pay for treatment related to the workers’ compensation injury, illness, or disease.
In simpler terms, if Medicare thinks a worker’s compensation insurance company should be responsible to pay for an injured worker’s future medical care, Medicare doesn’t want to pay it. The Medicare Set-Aside program allows an injured worker and the worker’s compensation insurance company to agree on a written future cost projection and submit it to Medicare for review. If Medicare approves the future cost projection, the employer’s worker’s compensation insurance company will then fund the Medicare Set-Aside. The employee will then use those funds to pay for medical care related to the work injury. As long as the injured worker properly accounts for the funds spent – and spends the funds only on care for the work injury – Medicare will then pay for additional medical care for the work injury, even if the funds in the cost projection are depleted.
Medicare has dedicated a huge portion of its website to Medicare Set-Asides. It even has a 139 page WCMSA Reference Guide. It’s probably never a good idea for an injured worker to navigate a worker’s compensation case involving a Medicare Set-Aside alone, but if so, the information contained on the Medicare website and guide are an absolute must-read.
Why is a Worker’s Compensation Medicare Set-Aside Needed?
Technically, a Worker’s Compensation Medicare Set-Aside is not a necessary thing. According to Medicare:
All parties in a workers’ compensation case have significant responsibilities under the Medicare Secondary Payer (MSP) laws to protect Medicare’s interests when resolving cases that include future medical expenses. The recommended method to protect Medicare’s interests is a WCMSA.
Therefore, the necessary step in any worker’s compensation case is to protect Medicare’s “interests.” Parties are asked to protect Medicare’s “interests” by trying to structure a settlement in a way that Medicare isn’t asked to pay for medical care for a work-related injury. So, the true obligation to parties settling any worker’s compensation case is to take a close look at whether the need for future medical care bumps up against Medicare’s refusal to pay, and if so, take steps to keeping Medicare from paying.
So, a Medicare Set-Aside isn’t technically needed. However, if one can be prepared, submitted to Medicare, funded, and properly utilized, it is by far the best way for an injured worker to “protect Medicare’s interests,” but more importantly to protect the injured worker’s interests by making sure that all of a worker’s medical costs are covered by Medicare in the future – work-related or not.
When Will Medicare Agree to Review a Medicare Set-Aside Proposal?
Unfortunately, Medicare places limitations on when it will review a Medicare Set-Aside proposal. Currently, Medicare will review a Medicare Set-Aside only in the following circumstances:
- The total worker’s compensation settlement exceeds $25,000.00 and the injured worker is already on Medicare; or
- The total worker’s compensation settlement exceeds $250,000.00 and, although the injured worker isn’t on Medicare yet, he or she expects to be enrolled within 30 months. (Note that injured workers approved for Social Security Disability (SSDI) will be eligible for Medicare 24 months after the disability began).
If the review thresholds are met, rest assured that the worker’s compensation insurance company will insist on preparation of a Medicare Set-Aside. This is because even the insurance company can find itself in trouble with Medicare if it fails to adequately consider and protect Medicare’s interests. So, what better way to determine if Medicare’s interests are protected in a settlement then by having Medicare itself review and approve a settlement involving future medical care?
Remember: even if Medicare’s review thresholds aren’t met, the parties must consider Medicare’s interests in all worker’s compensation cases. Thus, settlement agreements – even if the injured employee is back to work – are likely to include language stating that Medicare’s interests were considered. Insurance companies may create a cost-projection and require an injured worker to agree that a certain portion of any settlement be allocated to future medical care. This is a reasonable request, but it does create pitfalls for an injured worker that are best avoided with the assistance of a skilled worker’s compensation attorney.
How is a Worker’s Compensation Medicare Set-Aside Funded and Administered?
Medicare Set-Aside Funding
As part of an injured worker’s settlement agreement with the worker’s compensation insurance company, a Medicare-approved Medicare set-aside is usually funded with either
- a lump sum payment for the full amount, or
- “seed money” followed by annual installment payments as long as the injured worker remains living.
The lump sum is usually paid when the Medicare Set-Aside is for a small sum of money, say less than $10,000.00. The installment payments usually take place when the cost projection is much larger. The “seed money” will usually be enough to cover the first two years of projected medical expenses, and the insurance company will then purchase an annuity that will make all the remaining annual payments.
Medicare Set-Aside Administration
Medicare requires that all Medicare Set-Aside money be deposited into a separate, interest-bearing bank account, which can only be used to pay for medical expenses covered by the Medicare Set-Aside. It also imposes other strict requirements, including an obligation by the injured worker to provide detailed annual reports demonstrating to Medicare how the money was spent. Failure to abide by Medicare’s strict and often confusing requirement can have dire consequences. Most notably, Medicare may refuse to provide coverage for any medical care – work related or not – until the injured worker spends a certain amount of his or her own money for care. If this happens, the injured worker likely doesn’t have that kind of money, resulting in a trap that’s difficult to escape.
Injured workers are technically permitted to “administer” their own Medicare Set-Asides. Medicare has even prepared a guide to self administration, which can be found here. Because the consequences of improper self-administration can be so bad, Salmon & Hewins does not recommend self-administration to its clients in all except a very limited number of cases.
The best way by far is to have the Medicare Set-Aside professionally administered by a company like Ametros. Often, Salmon & Hewins is able to get the worker’s compensation insurance company to agree to pay for professional administration. There are some other companies who may agree to provide professional administration for free – they earn their profits by owning the pharmacy that provides meds listed in the Medicare Set-Aside. But even if the injured employee may be responsible to pay the administration fee, it’s often a very reasonable fee and well worth it considering the consequences of improper administration.
Conclusion
Injured Indiana workers may find Worker’s Compensation Medicare Set-Asides to be among the most confusing aspects of any worker’s compensation case. The good news is, if properly funded and administered, these are great tools that provide significant value to an injured worker. Because there are so many pitfalls to handling these correctly, it is always a good idea to consult with a competent worker’s compensation attorney. Salmon & Hewins can help. The initial consultation is always free.
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